INTERNATIONAL oil prices have dropped, but the Ministry of Mines and Energy has announced fuel prices will increase at midnight tomorrow.
The price of petrol will increase with 60 cents per litre and diesel with 30 cents per litre, because there was no increase in August.
The ministry says its August review shows the average price per barrel of petrol has dropped from US$85,72 to US$82,66, and from US$79,34 to US$75,51 for a barrel of diesel.
Under normal circumstances, a decrease in international barrel prices would result in a reduction in local prices as well.
However, the ministry has increased prices to ensure a balance between stimulating the local economy, as well as maintaining fuel prices which best reflect the market.
Augusts prices were kept unchanged in an attempt to revive economic activity, following Covid-19 restrictions that strained several aspects of the economy.
In September, diesel will cost N$13,88 per litre, while a litre of petrol will cost N$14,15.
This is the first time fuel prices have soared this high.
The only time they came close to this was about two years ago.
According to ministry spokesperson Simon Andreas, international oil prices have started falling amid an uncertain future due to the Covid-19 pandemic.
Another factor weighing down prices is the slowdown in the performance of the Chinese and American economies.
Since Namibia imports all of its fuel, the exchange rate between the United States (US) and Namibia dollars plays a role in determining local oil prices.
For August, the Namibia dollar marginally depreciated against the US dollar from the monthly average of N$14,52 recorded in July to N$14,74 recorded for August.
A depreciation causes increases in local fuel prices.
Andreas says for August, the fuel review has shown an under-recovery of 101 cents on petrol, and 42 cents on diesel.
While the above decreases would have been entirely passed on to consumers, Andreas says considering the economic environment, only part of the under-recovery was passed on, while the remainder was borne by the National Energy Fund.
Andreas says despite this increase, Namibia still has some of the lowest pump prices in southern Africa.
South African pump prices are at N$17,38 for petrol and N$17, 01 for diesel.
According to the International Energy Agency, the fast-evolving plans by government to accelerate transitions towards a more sustainable future have created a high degree of uncertainty that is testing the oil industry.
“It is crucial to invest in the upstream sector even during rapid transitions in which it would still take years to shift global transport fleets away from internal combustion engines to electric vehicles and other low-carbon alternatives,” the agency has said.
Some sectors – such as aviation, shipping and petrochemicals – will continue to rely on oil for some time.
Whatever the transition pathway, the oil and gas industry has an important role to play, and no energy company will be unaffected.
An effective and orderly transition will be critical – not only to reach international climate targets but also to prevent serious supply disruptions and destabilising price volatility along the way.
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